Technology and scale changes: The steel industry of a planned economy in a comparative perspective

Abstract

This paper provides an analysis of the role of technical advances and upscaling practices in the steel sector and the differences in these practices between planned and market-based economies. It focuses on the Czechoslovak steel sector, comparing it to other planned economies as well as Western economies. The primary method of analysis employed is the logistic-fit curve of technology diffusion, complemented with panel regression models. The paper draws two major conclusions: first, Czechoslovakia suffered from technological backwardness in the adoption of new steel technology with prolonged formation stage and high saturation levels as seen in some of the core steel markets. To some degree, this was due to the detrimental nature of central planning on new technology adoption. However, it was mainly linked to some specific characteristics of Eastern European markets, such as availability of scrap, the vintage of individual plants and the different structure of steelmaking costs. Second, the focus on Soviet-style large scale production was visible not only at the industry level but also at the level of the individual furnaces. It was this large-scale production that can be linked to improvements in relative energy efficiency – through economies of scale and learning-by-doing effects.